Energy Market Review, Tuesday 3rd April

Headlines for Monday, 26th March

Last week observed bullish movements for most power and gas contracts along the forward curve. However, some bearish movements occurred in day-ahead and month-ahead contracts.

EU ETS carbon grew 10.6% to average €13.2/t last week, and on 28 March, prices hit a fresh seven-year high of €14.1/t. Growth has seemingly stemmed from market speculators buying allowances, rather from market fundamentals only. Market participants, including speculators, are holding onto spare allowances for when the Market Stability Reserve comes into effect in 2019, which will aim to tighten the market. Prices rises have also come ahead of the European Commission’s release of CO2 emissions for 2017 this week.

Day-ahead power declined 5.9% to £48.8/MWh, down from £51.8/MWh. Increased solar output and easing gas prices aided in lowering power prices.

Day-ahead gas fell 6.7% week-on-week to 50.0p/th. With robust flows from gas storage facilities, strong LNG supplies, and easing demand levels, the system became oversupplied for large periods of the week.

Brent crude oil experienced an uptick of 2.8% to average $69.8/bl and reached $71.0/bl on 27 March. Prices have been supported by OPEC announcing cuts will remain until the end of 2018, due to continued rising output from the US.

API 2 coal prices continued to fall, declining 0.6% to average $74.1/t last week.

Brent Crude Oil

Brent crude oil experienced an uptick of 2.8% to average $69.8/bl and reached $71.0/bl on 27 March. Prices have been supported expectations that OPEC will announce current production cuts will remain until the end of 2018, due to continued rising output from the US.

API 2 Coal

API 2 coal prices continued to fall last week, declining 0.6% to average $74.1/t. This is likely owing to easing demand for coal across Europe, partly influenced by the rising carbon price making it less economical to use. API 2 coal prices remain higher compared to the same period last year ($64.4/t), up 15.0%.

EU ETS Carbon

EU ETS carbon prices grew 10.6% to average €13.2/t last week, up from €11.9/t the week before. On 28 March, prices hit a fresh seven-year high of €14.1/t. Growth has seemingly stemmed from market speculators buying allowances, rather from market fundamentals only. Market participants, including speculators, are holding onto spare allowances for when the Market Stability Reserve comes into effect in 2019, which will aim to tighten the market.

NBP Gas

Near-term

Most near-term gas contracts experienced losses last week. Day-ahead gas fell 6.7% week-on-week to 50.0p/th (down from 53.6p/th). With robust flows from storage facilities, strong LNG supplies, and easing demand, the system became oversupplied for large periods of the week, ultimately easing near-term prices. Warmer temperatures were the primary driver leading to easing demand. The month-ahead (April) contract slipped 0.3% to 49.1p/th last week.

Seasonal

Annual April 18

Annual April 18 gas rose 1.6% to 49.9p/th. The contract is now 6.9% above its price the same time last month (46.7p/th).

Baseload Power

Near-term

Most near-term baseload power contracts rose last week. Contrary to this trend, day-ahead power declined 5.9% to £48.8/MWh, down from £51.8/MWh the previous week. Increased solar output and easing gas prices across the week aided in lowering power prices. However, rising carbon prices would have pegged back losses. The month-ahead (April) contract grew 0.6% to £49.3/MWh.

Seasonal

Seasonal baseload power prices rose last week, increasing on average by 1.6%. Summer 18 power gained 2.3% to £47.3/MWh and the winter 18 contract grew 1.7% to £52.8/MWh.

Annual April 18

The annual April 18 power contract lifted 2.0% to £50.1/MWh. In comparison with the same period last month (£46.4/MWh), prices were 7.9% higher.